Jessops, the UK’s largest camera retailer, has been saved from collapse by its bank HSBC. The teetering company has agreed to a fairly major restructuring that will leave the bank with a 47% stake – in return for which it will write off £34m of the money that Jessops owes it. Whether this will be enough to save Jessops in the long-run remains to be seen, given that supermarkets and internet retailers are still eating its lunch. But HSBC’s decision not to pull the shutters down will at least keep it afloat for the time being.
The specific detail of the restructuring (technically speaking it’s apparently a ‘solvent liquidation’, which sounds like a contradiction in terms to us) is a bit too complicated for our tiny little brains, but it basically involves HSBC, the biggest shareholder, agreeing a debt-for-equity swap. Meanwhile the Jessops operating company will be liquidated, allowing a relatively meagre £100,000 to be returned to shareholders. A new company will then be set up, of which 47% will be owned by HSBC, 33% by pension trustees and 20% by an employee trust (which will apparently be used to incentivise management for a turnaround).
Although it might look like a raw deal for the previous shareholders, we are told Jessops had little choice. The company says that without this agreement, liquidation was looking increasingly likely – in which case 2,000 jobs would have been lost and shareholders would have presumably got even less, perhaps even nothing at all. Chief exec David Adams also reckons this was preferable to the pre-pack administration route because of the company’s close relationships with its suppliers; Jessops needs their support if it’s going to revive its fortunes, but that would be less likely after a pre-pack (which usually sees creditors lose out).
Adams has taken some drastic steps to try and cut costs, including reducing headcount at head office from 375 to 150 in less than two weeks (ouch), but this has not prevented its debt levels from steadily escalating to £54m. Even after today, there will still be £20m of debt in the business – so Jessops is going to have to shift a fair few cameras if it’s to get back in the black. This might seem a brave move for HSBC, but considering how much the floundering company already owes, you can see the logic. ‘In for a penny’, and all that...
In today's bulletin:
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Jessops survives - just - as HSBC takes pity on it
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